Auto Slowdown: Honda reopens Manesar factory after 2 weeks but slowdown in industry still persists – Business Today

India’s second-largest two-wheeler maker Honda Motorcycle and Scooter India (HMSI) on Monday reopened its Manesar factory after almost two weeks of shut down.

Around 1900 permanent workers were asked to resume work in batches and no vehicles were produced, which is expected to happen only later this week. Neither was there any clarity whether a truce with the worker’s union on the issue of retrenchment of 200 contractual workers had fructified.

In lieu of the slowdown in the domestic automobile industry, the worst in the history, HMSI had on November 5 barred some contractual workers from entering the factory premises, which immediately snowballed into a major crisis. Workers, including those that are permanent, started protesting and resorted to a tool down strike. The agitation continued for the rest of that week leading to HMSI eventually shutting down the factory entirely on November 11.

Also Read: Slowdown Blues: Maruti Suzuki to shut down Gurugram, Manesar plants for 2 days

The Manesar factory is Honda’s oldest production facility in India and has the capacity to produce 1.5 million units every year. Besides the 2500 workers on the regular payroll, Honda also employs around 2500 contractual workers in the plant.

The disagreement between workers and the management widened after the fresh round of retrenchment which followed about 600 other contract workers who had been retrenched in tranches over the last few months.

Honda has blamed the slowdown in the market for the cut in production at Manesar. India’s two-wheeler segment has seen a sharp 16.43 per cent decline in sales in the first seven months of this fiscal. HMSI’s sales have also declined by a similar 16.34 per cent.

“The decision to resume production at Manesar plant was initiated on November 22. All permanent staff associates were informed to join duties from 25th to 28th November in four batches. Process of joining back to work has started as per the schedule and we look forward to normalcy of operation after this process is completed,” the company said in a statement on Monday.

“With the intention of maintaining industrial peace, Manesar plant management reaffirmed that all permanent workers are expected to resume work as per the schedule and carry out assigned duties with discipline, good faith, cooperation and positivity,” it added.

Workers, including the company’s recognised union, have alleged that Honda has used the excuse of a slowdown to not regularise workers at Manesar but has increased production at its other factories in neighbouring Tapukara in Rajasthan, and in Gujarat and Karnataka. The union feels, given Manesar’s blemished track record on labour relations, the Japanese management has meted out a step-motherly treatment to workers in its oldest factories.

“Other plants of the company continue to produce normally. They are just cutting production here. This impacts jobs,” said Suresh Gaur, HMSI employee union president.

Also Read: Suppliers to three major OEMs – Maruti, Hero MotoCorp and Honda account for bulk of 1,369 injured workers

A veteran trade unionist, Gaur has been a difficult negotiator for the company’s management in the past but there may be some truth to his allegation. In a statement on November 22, the company raised the issue of low productivity at the Manesar factory. Privately, senior executives also said the relationship between the union and the management at Manesar is mostly frosty and the mistrust runs deep.

“As an industry practice, the contractual workers whose term had been completed were relieved from their work but permanent workers were still not impacted. Instigated by the union the relieved contractual workers were pressurized to sit in front of the union office which further resorted to illegally occupying the plant’s premises,” the company said in the November 22 statement. “Manpower efficiency increase is a basic expectation for productivity, more so in slowdown. The work culture of Manesar factory is embedded by a high level of indiscipline instigated by the union.”

The Gurgaon-Manesar belt is one of the biggest automobile hubs in the country and besides Honda, companies like Hero MotoCorp and Maruti Suzuki have large factories in the area. Further, a number of ancillary units also dot the vicinity. The region, however, has become a hotbed of labour unrest. Maruti had witnessed two bruising instances of industrial dispute at its Manesar factory in 2011 and 2012 when part of the factory was set afire leading to the death of a senior HR executive.

Honda’s own factory has been jinxed since 2005 when after months of simmering discontent between workers and the management on a host of issues including the formation of a union, matters came to a head in July when around 90 workers were injured in clashes with the police.

“There has been a lack of empathy from both sides. The union has been stubborn at times and the management indifferent. The Japanese have simply gone ahead and set up factories in other states to reduce their dependence on this factory,” says an industry veteran. “Nobody has tried to fix the problem and the mistrust has grown. Gaur is a notorious rabble-rouser in the area but the management needs to learn to adapt as Indian workers are very different from those in Japan. If they cannot manage Manesar, problems will crop up in their other factories as well.”

With layoffs happening in factories across the sector in other parts of the country as well, the fear is unrest may be brewing in other companies as well. Barring a few, almost every company including India’s largest carmaker Maruti Suzuki, Tata Motors, Mahindra and Mahindra, Toyota Kirloskar Motor Ltd and Nissan India have retrenched workers in the last 6 months due to low demand. Maruti has so far let go off over 3000 workers at its factories in Gurgaon, Manesar and Gujarat.

Mahindra has also laid off around 1500 contractual workers while Tata Motors has also let go of an undisclosed number of workers whose contracts were due for renewal in the last few months. Similarly, Nissan let go of about 1710 employees in India during 2018-19 as part of its plans to downsize 12,500 employees globally.  The passenger vehicle segment has seen a steeper 20.22 per cent decline in sales in this fiscal so far.

“I think what has helped the industry so far is that the slowdown is not somebody’s imagination and has impacted everybody. So the workers and unions have been patient,” said a top official at a Pune based automaker. “But companies may need to let go off more people in future and may not be able to give a guarantee when those workers would be re-hired. This uncertainty may breed mistrust and can quickly snowball into a crisis unless handled deftly.”

Officially, companies have been guarded in responding to questions regarding layoffs in the past and potential retrenchment in the immediate future. Most were unequivocal about not touching permanent workers, the stance towards contractual and temporary workers is vague.

“Given the slowdown in the economy and the impact on business, we have taken prudent actions to curb costs without impacting our performance. We used this lean period in developing capability of our workforces, by upskilling and giving them the exposure of working on multiple manufacturing lines and cross functions. For Example, our maintenance guys were given an in-depth understanding of our manufacturing processes so that they can arrest ongoing and future quality issues,” said a Tata Motors spokesperson. “Upskilling employees also resulted in excellent resource optimization. For instance during the lean period, while line X was not operational, the manpower of line X was deployed to work on Line Y.”

Also Read: Auto slowdown: Honda sees more pain in future, says good festive season not enough

“Toyota Kirloskar Motor has not let go of any employees due to slowdown in demand. However, after completion of the term of existing contracts, we have calibrated new employment contracts of indirect manpower to ensure flexibility and adjustment in operations,” said Shekhar Vishwanathan, vice chairman and whole-time director, Toyota Kirloskar Motor Ltd. “Looking at market demand, we would adjust the indirect workforce.”

“There has been no change in our workforce due to slowdown. Ford’s over 5000 workforce of permanent employees remains unchanged,” said a spokesperson at Ford India. “As per MoUs with Governments of Tamil Nadu and Gujarat, Ford employs trainees for a fixed period 12/18/24 months period depending on various projects. The same has also continued during the slowdown.

The next few months are expected to be even more challenging and will test the mettle of those that have managed without retrenching workers so far. The industry is heading towards a complete transition from BS-IV compliant vehicles to BS-VI at the end of the fiscal on March 31, 2020. While such a transition has never been attempted by any country in the past, the switch would happen at the stroke of midnight, which means the industry would have to completely exhaust all its stock of BS-IV vehicles in the next four months. This may mean even deeper production cuts and likely more layoffs.

“We are planning our production volumes to meet the BS-VI milestone and we expect a smooth transition. Regular adjustments are being made in shifts and production days to ensure that excess BS-IV products do not pile up at TKM or its dealers during this transition period,” said Vishwanathan of Toyota. “The last 11 months have been challenging for us and the auto industry. The next few months also appear to be highly volatile and challenging. We are making plans and continuously adjusting them to match the market condition. Usually, the takt time (average time between the start of two production units) is lowered when we have to manufacture higher number of vehicles and increased when the number of vehicles to be manufactured is less. Even then if stock build-up occurs, we have to resort to measures such as lowering production or at times, shutting down of production.”

In this fiscal so far Toyota had 10 non-production days for Plant-1 and 8 such days for Plant-2. Two-wheeler market leader Hero MotoCorp said it anticipated the slowdown well in advance which helped it recalibrate its production schedule. At the same time, it has already started production of BS-VI compliant two-wheelers to soften the blow next year.

“The slowdown in the two-wheeler industry has been going on for almost a year now. So we have been able to plan and schedule our production well in advance and manage our manpower requirement accordingly. We also ensure that these plans are shared with all our workforce during the regular communication meetings, which leads to smooth and cordial working relations,” said a Hero MotoCorp spokesperson. “We have already commenced the sales of Splendor iSmart – the country’s first BS-VI motorcycle. Going forward, we will be launching our other BS-VI vehicles in a phase-wise manner and gradually ramp up their production.”

There is palpable edginess behind the veneer of composure. Any more shocks and the industry may have to face its biggest challenge yet. This time from within its factories.

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